Settlement and License Agreement - Enhanced Workflow

You are tasked with drafting a comprehensive Settlement and License Agreement that resolves ongoing litigation while establishing a licensing relationship between the parties. This dual-purpose agreement must satisfy both dispute resolution requirements and create a functional intellectual property licensing framework.

Document Purpose and Context

Begin by thoroughly understanding the underlying dispute and the parties' business relationship. Search through all uploaded case documents, correspondence, and pleadings to extract the complete factual background. Identify the specific claims being settled, the intellectual property at issue, any prior negotiations or term sheets, and the parties' stated objectives. This foundational research will inform every section of the agreement and ensure consistency with the parties' actual circumstances.

Party Identification and Recitals

Draft a detailed parties section that includes full legal names, entity types, jurisdictions of organization, principal places of business, and the capacity in which each party is entering the agreement. For the recitals, construct a narrative that explains the nature of the dispute, the litigation history (including case numbers and courts), the intellectual property rights involved, and the parties' mutual desire to resolve their differences and establish a licensing relationship. The recitals should provide sufficient context that a third party reading the agreement years later would understand what was settled and why.

Settlement and Release Provisions

Craft comprehensive settlement terms that include mutual general releases covering all claims that were or could have been asserted in the litigation. The release language must be broad enough to provide finality while being specific enough to be enforceable. Address whether the release extends to related parties, affiliates, successors, and assigns. Include specific carve-outs for obligations created by this agreement itself. Research current best practices for release clauses in your jurisdiction, as overly broad releases may be unenforceable while narrow releases may fail to achieve the parties' objectives. Consider whether to include a covenant not to sue as an additional layer of protection.

License Grant Structure

Define the intellectual property license with precision and clarity. Specify exactly what intellectual property is being licensed—whether patents (by number), trademarks (by registration number and common law marks), copyrights, trade secrets, or know-how. Determine whether the license is exclusive, non-exclusive, or sole, and define the scope carefully. Address the licensed field of use, geographic territory, and duration (term of years, perpetual, or tied to patent life). Include provisions for sublicensing rights if applicable, specifying whether sublicenses survive termination. Consider whether improvements or derivative works are included in the license grant and who owns such developments.

Financial Terms and Consideration

Structure the payment provisions to reflect the dual nature of the agreement. Distinguish between settlement payments (which may have different tax treatment) and ongoing license royalties. For settlement payments, specify amounts, payment schedules, and whether payments are characterized as damages, consideration for the license, or both. For royalty provisions, define the royalty base (net sales, gross revenue, units sold), the royalty rate (which may be tiered or vary by product), payment frequency (quarterly, annually), and audit rights. Include detailed accounting and reporting obligations, specifying what financial information must be provided and when. Address late payment consequences, including interest rates and potential license termination.

Confidentiality and Non-Disclosure

Incorporate robust confidentiality provisions that protect both the terms of the settlement and any proprietary information exchanged under the license. Define what constitutes confidential information, including whether the existence and terms of the agreement itself are confidential. Specify permitted disclosures (to attorneys, accountants, as required by law or court order) and the procedures for handling compelled disclosures. Consider whether a public announcement will be made and, if so, draft mutually agreed language. The confidentiality provisions should survive termination of the agreement and specify a duration appropriate to the sensitivity of the information.

Representations, Warranties, and Indemnification

Include mutual representations regarding authority to enter the agreement, non-infringement of third-party rights, and ownership of the licensed intellectual property. The licensor should represent that it has the right to grant the license and that the licensed IP does not infringe third-party rights to its knowledge. The licensee should represent its ability to perform its obligations. Consider warranty disclaimers appropriate to the context—settlement agreements often include "as is" provisions for the licensed IP. Draft indemnification provisions that address third-party claims, specifying the scope of indemnification, notice requirements, control of defense, and limitations on liability.

Term, Termination, and Post-Termination Rights

Define the agreement's term and the conditions under which either party may terminate. Distinguish between termination of the settlement provisions (which typically cannot be terminated once executed) and termination of the license. Specify whether the license can be terminated for material breach, bankruptcy, or non-payment, and include appropriate cure periods. Address what happens upon termination: whether the licensee must cease use immediately, whether there is a wind-down period, what happens to inventory, and whether any provisions survive termination. Consider whether the settlement release survives license termination or whether license termination revives any claims.

Dispute Resolution and Governing Law

Select the governing law carefully, considering which jurisdiction's law is most favorable and whether the choice will be respected by courts. Include a detailed dispute resolution mechanism that may involve escalation procedures (negotiation, mediation, arbitration) before litigation. Specify the venue for any litigation or arbitration, whether the prevailing party recovers attorneys' fees, and whether the parties waive jury trial. Consider whether disputes about the settlement terms should be handled differently from disputes about the license terms.

Additional Provisions and Execution

Include standard contract provisions such as entire agreement clauses, amendment procedures (requiring written consent), assignment restrictions (particularly important for licenses), severability, waiver provisions, and notice requirements with specific addresses and methods. Draft signature blocks that include space for corporate officers to sign with their titles, dates, and any required attestations or acknowledgments. If the agreement requires board approval or regulatory filings, include provisions confirming such approvals have been obtained.

Document Assembly and Review

Once you have gathered all necessary information from the case documents, researched applicable legal standards, and structured all provisions, create a polished, professional agreement that integrates all these elements into a coherent whole. Ensure internal consistency in defined terms, cross-references, and numbering. The final document should read as a unified agreement rather than disconnected sections, with smooth transitions and logical flow from the settlement of past disputes to the establishment of future licensing rights.